The story was known about Budovsky and Katz (2 ukrainans) started LR in Brooklyn NY,
after being arrested they orchestrated the sale of LR to a new formed Costa Rican company,
but were actually still behind it all the time.

Costa Rican prosecutor José Pablo González said Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using a company he created in the country called Liberty Reserve.

Sounds like they had it "figured out" several years ago, but needed to be able to prove it.

What's going to be interesting over the coming days and weeks is watching how many HYIPs disappear due to their accounts being frozen and how many HYIP owners use the seizures to simply take the money and run.

It is more interesting to see how and when if possible distribution of frozen assets will happen.
LR was used mostly for illegal stuff.
And I believe LR never had enough assets in banks to back up their system's "credits".

Perfect Money now rushed in to announce that they will not take US residents as clients anymore:

Recent changes in Perfect Money Policy
25.05.13

Dear Perfect Money Customers,

We bring to your attention that due to changes in our policy we forbid new registrations from individuals or companies based in the United States of America. This includes US citizens residing overseas. If you fall under the above mentioned category, please do not register an account with us.

Join Date: May 2013
Posts: 8
Default I'm going to do suicide
Libertyreserve have left me with this one and only option. If their site does not comes online within a week i will do suicide on a live cam. Libertyreserve officials and US govt will be responsible for my death.

I am broken and they took my money. I don't have a penny now and my whole family runs on my income.

Digital currency site Liberty Reserve shut down after arrest of Costa Rican owner in Spain

Posted: Saturday, May 25, 2013 - By David Boddiger and L. Arias
Costa Rican agents raided Liberty Reserve founder Arthur Budovsky’s offices and home in San José and Heredia on Friday.

Panic spread on the Internet Friday as word about Arthur Budovsky Belanchuk’s arrest reached users of his digital currency business Liberty Reserve, which was shut down on Friday.

Budovsky, 39, was arrested on Friday in Spain as part of a money laundering investigation performed jointly by police agencies in the United States and Costa Rica. U.S. officials likely will seek his extradition.

Costa Rican prosecutor José Pablo González said Budovsky, a former U.S. citizen and naturalized Costa Rican of Ukrainian origin, has been under investigation since 2011 in Costa Rica for suspected money laundering using apparent shell companies he created to run Liberty Reserve.

Budovsky relocated to Costa Rica after he and partner Vladimir Kats were indicted on July 27, 2006, in New York on charges of operating an illegal financial business, GoldAge Inc. – a precursor to Liberty Reserve – from their Brooklyn apartments, according to the U.S. Justice Department. U.S. officials said the two had transmitted at least $30 million to digital currency accounts worldwide since beginning operations in 2002.

Budovsky and Kats were sentenced to five years in prison in 2007 for engaging in the business of transmitting money without a license, a felony violation of state banking law. They received five years probation.

Officials have not commented on how much money Liberty Reserve accounts handled, nor how many clients are affected by its closing. But those numbers could be higher than in the GoldAge case.

The daily La Nación reported that Budovsky, a naturalized Costa Rican, renounced his U.S. citizenship last year, after the joint investigation began. The Tico Times could not independently verify that information, as Costa Rican government agencies are closed for the weekend.

However, Budovsky continued operating the company in conjunction with other Costa Rican corporations, including Silverhand Solutions and Technology S. A, Worldwide E-Commerce Business S .A., Grupo Lulu Limitada, Triton Group A and A, S. A. and Cyberfuel.com.

The same year SUGEF ordered Liberty Reserve closed, U.S. prosecutors based in New York asked Costa Rican officials to begin investigating Budovsky and his companies. On Friday, San José prosecutors raided Budovsky’s home and offices in Escazú and Santa Ana, southwest of San José, and in the province of Heredia, north of the capital.

Investigators allege that Budovsky’s businesses in Costa Rica were used to launder funds from child pornography websites and drug trafficking.

Both GoldAge and Liberty Reserve operated under a similar system, allowing users to nearly anonymously open accounts with limited documentation of identity. Deposits are backed by gold and other precious metals, and customers could withdraw money by requesting wire transfers to accounts anywhere in the world or by having checks sent to individuals.

“The ability to conduct transactions in digital currencies is constantly available, making digital currencies more convenient than other methods of funds transfer, which may be limited by normal business hours and international time zones. Additionally, digital currency transactions can be conducted from any location or device with Internet access,” a 2008 report by the U.S. National Drug Intelligence Center stated.
“Because most digital currencies are denominated into internationally recognized weights of precious metals, inconveniences traditionally associated with international financial transactions, such as calculating international exchange rates for another nation’s currency, are eliminated,” the report added.

Liberty Reserve, which operated without oversight from any global agency, was a convenient tool for foreign currency brokers, as it allowed them to bypass local legislation and avoid exchange rate fluctuations, particularly in developing countries. But its lack of oversight also attracted organized criminal elements, prosecutors said.

“Payment in digital currencies makes it easier for traffickers to launder funds that no longer need to be placed into the traditional financial system. Payment can be immediately forwarded to an international digital currency account, perhaps in payment to the original source of supply, or further layered through multiple digital currency accounts and exchangers until reintegrated into the legitimate economy,” the National Drug Intelligence Center stated.

To open a Liberty Reserve account, users needed only to submit a name, address, email address, date of birth and occupation.

Budovsky’s arrest and the closing of the Liberty Reserve website prompted a wave of online chatter from affected clients. Forex Magnates, which describes itself as a “specialized forex news and research source,” called Liberty Reserve “the leading payment channel for traders in emerging and frontier markets.”

Citing a broker and analyst in Pakistan, Forex Magnates said, “Forex brokers have been benefiting from Liberty Reserve’s vast access as a payment provider, especially in countries where traders face difficulties in transferring funds. Liberty Reserve was a ‘gift’ for several traders, especially after the State Banks’ (State Bank of Pakistan) changes to international money transfers.”

Online reaction has also come from Nigeria, Malaysia and other countries.

i lost below 1k but one of the biggest exchanger xxxx in my country indonesia lost 175ksusd another lost above 100kusd, sound crazy yeahh and mostlly mid exchanger lost above 20kusd, retail exchanger above 1k

What's going to be interesting over the coming days and weeks is watching how many HYIPs disappear due to their accounts being frozen and how many HYIP owners use the seizures to simply take the money and run.

Many hyip sites will fail and disappear but scammers will find a New DGC to replace LR with similar conditions (anonymous and non-refundable) to run their scam schemes.

In past couple of days i saw a lot of people on internet in denial of every small detail about these news articles.
The most ridiculous of them was claim that Arthur Budovsky has nothing to do with Liberty Reserve.
Well they can deny as much as they want, if they were paying attention to HYIP world for long time and understood a thing or two about offshores,
they would know that formation agent (Allan Garcia) of the Costa Rica companies in fact has noting or little to do with Liberty Reserve.